As far as fashion fairy tales go, this one's a doozy. Karl Lagerfeld, the world's most famous fashion designer, was being heralded for an unprecedented and astonishingly successful streak of 51 years designing for Fendi. The famed Roman luxury label, once a small, family-run business, was celebrating its 90th anniversary and on a serious global roll. There was fearless expansion happening everywhere, including the fancy new white marble headquarters in the Palazzo della Civiltà Italiana (a modernist Fascist-era wonder courtesy of Benito Mussolini) and the 17th-century Palazzo Fendi, replete with a new flagship, a jewel-box boutique hotel that houses a Japanese restaurant and a rooftop bar, and a private VIP apartment. Basta.

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A party was certainly in order. In July, Fendi threw a fete of fabled proportions, hosting an outdoor haute couture fur fashion show in the famed Trevi Fountain (that's right, in it), followed by a breathtakingly beautiful dinner for 600 at the Villa Borghese's Terrazza del Pincio. The biggest coup, perhaps, was Lagerfeld's clear Plexiglas runway that stretched over the fountain's pool, allowing each model in the show, led by Kendall Jenner, to stride across as though effortlessly walking on water.

From the international fashion editors who had been whisked by private plane directly from the couture shows in Paris, to celebrities like Kate Hudson, perched in the front row, to the starry-eyed housewives hanging out of their open windows overlooking the piazzas below, the monumental spectacle rendered everyone speechless.

"It was a magical moment," admits Lagerfeld, who flipped a coin into the fountain during his postshow bow with Silvia Venturini Fendi, granddaughter of founders Adele and Edoardo Fendi and the brand's current creative director of accessories. "Everythingfad will now look modest next to this."

In his seven decades in fashion, Lagerfeld has, of course, already seen it all. His not-modest productions for Chanel—including re-creating full-scale supermarkets and airports in the middle of Paris's Grand Palais—are the stuff of legend. So too is Fendi's ambitious show staged on the Great Wall of China in 2007. But the Trevi moment was more mega than usual. Part of it was being transported to a spellbinding city in front of the iconic fountain, which had received a glorious face-lift, thanks to Fendi's generous 2.2 million euros ($2.4 million) funding. Part of it was the brand's second Haute Fourrure collection of couture fur that combined the delicacy of the Paris ateliers with the wizardry of Fendi's master furriers. The garments featured intricate fur intarsias tufted with organza flowers, feather bugs, and embroidered butterflies. The resulting garden scenes that looked like romantic Art Nouveau illustrations.

But the most potent scent that wafted around Lagerfeld that evening was the sweet smell of success. The designer's enduring relationship with Fendi is a collaboration that began in 1965 and has continued uninterrupted for more than 50 years. In today's transient world, where designers are lucky if they last four seasons, five decades is a remarkable feat.

"It's the longest collaboration in fashion," the designer says proudly of his record contract. "No one has lived long enough to do it for such a long time, and I'm not tired of it at all. I even think I work better today and have a clearer head. My work is a bigger priority now than when I was younger, and it's a very good thing."

"My work is a bigger priority now than when I was younger, and it's a very good thing."

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Lagerfeld was in his early 30s when he was contacted by the famous five Fendi sisters, after his name had been brought up by a mutual PR friend. "There was Alda," Lagerfeld recalls, "who was blonde, a bit like Silvana Mangano. She was the youngest, and she was very different from the others. The eldest was Paola, who was the most brunette. I liked her a lot; she was the fur expert. Then, Carla with her short hair; she was the driving force behind everything and had a real vocation for PR. Franca was blonde and quieter; she took care of the accessories. Then there was Anna, who had curly hair and a little turned-up nose. Silvia [Anna's daughter]was a child, and she modeled for the pictures we did for the unisex capsule collection in 1967. She has been raised here. I don't remember Fendi without Silvia."

The sisters hired the young Paris-based designer as a freelancer, a revolutionary concept at the time. "There was no combination like this in the world in terms of ideas," he says. "Carla [invented it]. She was kind of a genius."

Lagerfeld arrived his first day in Rome rip-roaring and ready to go as the peacock he was—and still is. "I had a Cerruti hat, long hair, and dark glasses," he recalls. "I was wearing a printed ascot tie and a jacket like an English hunting one. I used to wear it together with French-style culottes and boots, and I had a bag that I bought in Milan."

Together the Fendi sisters and their designer radically reimagined the fur business, transforming it from a boring bourgeois status symbol into a playground of creative fantasy. To signify their mission, Lagerfeld invented the double "F" logo—one upside down, snuggled together, which stood for "fun furs"—and is still used today.

Since their partnership began in 1965, Fendi and Lagerfeld have broken every fur barrier in the business. They have perfected groundbreaking techniques that most fashion designers take for granted today, including knitting fur, pleating it on fur skirts, creating ultralight "summer fur," and pioneering the intricate intarsias that allow several different kinds and colors of fur to be sliced up and stitched back together like artful puzzles. Throughout the years, Lagerfeld rebelliously ripped out linings, tinted fur wild colors, shaved it, gilded it with 24-karat gold, wove it like a basket, and buried it in precious jewels, embroideries, and paillettes.

"We are not doing basic mink coats," the designer deadpans. "We are a thousand miles away from that."

The fearless experimentation is due to Fendi's unique stable of artisans, first corralled in 1925 by Adele and Edoardo Fendi, who passed down their extraordinary talent, techniques, and tricks to the specialized craftsmen working today.

"For me, fur, especially high-fashion fur, is something purely Italian," Lagerfeld says. "I never do fur in France because there are not many great fur artisans, and their techniques are basic compared to what I'm used to at Fendi."

"I'm not on an ego trip. I'm only interested in the craft and the design and to work with people I enjoy."

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At Fendi, anything and everything is possible, which is a perfect pairing for a designer who sketches faster than he talks. At present, the Fendi archives are filled with more than 70,000 sketches created by Karl Lagerfeld. That may very well be another world record.

"The difference between me and every other designer today is that I sketch everything myself," he explains. "I don't have 10 people doing it on a computer. Every model you see in shows is an original sketch by me. The première [head of the atelier] can see every detail and proportion."

So, pray tell, what is the secret of staying with a fashion company for half a century?

"I'm easy to work with," he reveals. "I'm not on an ego trip. I'm only interested in the craft and the design and to work with people I enjoy. Many other designers have an ego problem. Most of them do. That's really the problem."

But there's more, says Lagerfeld. "We work so well together," he says of Silvia Venturini Fendi and her mother and aunts before her. "I never had the feeling I was married, so it was like an open marriage situation. I've kept the passion because there is no exclusivity. I need the fresh air from the outside to see what's going on. If you put me in a cage, I am worthless."